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AUGUST 14, 2006
Edited by Harry Maurer Eating Dust In Detroit Japanese carmakers reached more milestones last month. On July 31 an industry group announced that in fiscal 2005, the Japanese built more vehicles abroad than they did at home. And where are many of those autos finding buyers? You guessed it. In July, Toyota (TM ) sold more cars than Ford (F ) in the U.S., and Honda (HMC ) passed Chrysler (DCX ) as the Japanese companies rode their reputations for offering the most fuel-efficient vehicles. With gas stuck around $3 a gallon, Ford, GM, (GM ) and Chrysler are choking on pickup trucks, and big SUVs are falling from favor with suburbanites. While GM weighs a hookup with Renault-Nissan (NSANY ), Ford is exploring alliances and possible asset sales such as Jaguar (F ), part of Ford Credit, and Ford's one-third stake in Mazda to raise some cash and rev up the company's languishing share price. See "July Turns Up the Heat on Detroit" Pfizer's Surprise Most handicappers had counted him out, but Jeffrey Kindler got the job when Pfizer (PFE ) suddenly announced on July 28 that it was replacing CEO Henry McKinnell Jr. Kindler, a lawyer with little operations experience, now will try to heal the ailing $51 billion drug behemoth.   KKR May Be In The Chips Another private equity deal for the record books: On Aug. 1, The Wall Street Journal reported that Kohlberg Kravis Roberts and partner Silver Lake were poised to win a drawn-out bidding contest against other marquee rivals to buy the chip unit of Dutch giant Philips (PHG ). The $10 billion-plus price is the highest for a semiconductor buyout and values the unit at almost 15% higher than many analysts thought it was worth. KKR apparently senses untapped juju in the company's intel- lectual-property portfolio and vast array of components. See "What Are KKR's Plans for Philips Semi?" Time For AOL 28.0 His portal is still a mess, but wine-loving Time Warner (TWX ) CEO Richard Parsons can still raise a toast of oaky chardonnay. Despite AOL's loss of nearly 1 million subscribers in its most recent quarter, a surprise hike in AOL ad sales helped his company to a better-than-expected $1 billion in second-quarter earnings. AOL's zillionth new strategy: It's eliminating its fee for broadband customers and will offer videos to do battle with the YouTubes of the Internet. Knight's Largesse Well, he just did it. Nike (NKE ) founder and Chairman Philip Knight on Aug. 1 pledged $105 million to Stanford, the largest single gift to a B-school. Most of the money is earmarked for a $275 million graduate business school campus that will be named after Knight, university officials said. Knight earned a Stanford MBA in 1962 and wrote a thesis that proposed creating a company that would manufacture in cheaper overseas locales. See "Nike Founder Gives $105 Million to Stanford" It's A Gas Being Big Oil Every corner of the oil patch turned in a high-octane second quarter. The integrated giants cashed in, of course, led by Exxon Mobil's $10.4 billion profit, up 32% from a year earlier. So did refiners like Valero (VLO ) (up 124%), service companies like Schlumberger (SLB ) (up 25%), and drillers like Noble (NE ) (up 145%). Expect more of the same in the quarters ahead. But with many players ramping up multibillion-dollar expansions, the industry could renew its boom-and-bust reputation two to four years from now. Investors might ponder that as they bid up share prices. See "Will Oil Profits Run Out of Fuel?" and "Big Oil: Booming Profits, Rising Costs" United In The Black When it comes to delayed takeoffs, this takes the cake. United Airlines (UAUA ), out of bankruptcy in February, reported on July 31 its first quarterly profit in six years. Despite record fuel costs, Chicago-based United said it earned $119 million in the second quarter as revenue climbed 16%, to $5.11 billion. All its cost-cutting during three years in Chapter 11 certainly helped. So did the broad rise in demand, which has allowed the industry to jack up fares and still fill its seats. Indeed, all the majors except bankrupt Northwest (NWAC ) and Delta (DALR ) are making money. Wal-Mart Says Auf Wiedersehen For the world's biggest retailer, Germany provided an expensive lesson in how not to enter a foreign market. Wal-Mart (WMT ) underestimated German labor unions and local competitors such as Aldi. On July 28, after nine years of losses, Wal-Mart announced it will sell its 85 German stores to Dusseldorf-based Metro for a price one insider says was tens of millions less than the value of unsold merchandise and other physical assets. Wal-Mart will take a $1 billion charge. No Mercy For Ebbers It's true, 25 years is a long time. But in upholding former WorldCom CEO Bernard Ebbers' 2005 fraud conviction, the U.S. Court of Appeals for the Second Circuit on July 28 said his jail sentence "is harsh but not unreasonable." Ebbers, 65, who has been free pending the ruling, had challenged the sentence as excessive. At his trial last year, Ebbers argued that former Chief Financial Officer Scott Sullivan orchestrated the $11 billion accounting fraud at the telecom company and that Ebbers knew nothing about it. Sullivan, who copped a plea, is looking at five years. Plan B May Get The Nod Is it morning for the morning-after pill? The FDA said on July 31 -- a day before a confirmation hearing for Acting Commissioner Dr. Andrew von Eschenbach -- that it may soon approve the sale of the Barr Pharmaceuticals (BRL ) anti-pregnancy pill, named Plan B, without a prescription to women 18 and over. Agency reviewers had ruled the drug safe for over-the-counter use as far back as 2003, but senior officials overruled them after conservative groups objected. In retaliation, some Democratic senators said they would block von Eschenbach's confirmation. Hillary Clinton (D.-N.Y.) and others warn that they will continue to do so until the drug is cleared. D.U.I. Of The Week He has played a futuristic, hot-rodding marauder, a half-crazed police detective, and a guy who can read women's thoughts. But Mel Gibson now seems to be perfecting another tried-and-true Tinseltown role, the self-destructive megastar. His drunken tirade against Jews after being pulled over by Malibu cops on July 28 has already cost him one gig, a mini-series about the Holocaust for ABC. And it may cost him more, although Disney (DIS ) says it is so far sticking with its plans to release Gibson's latest directorial effort, the Mayan epic Apocalypto, in December. Even a delayed apology to "everyone in the Jewish community for [my] vitriolic and harmful words" may not be enough to restore the 50-year-old's luster. Meanwhile, Gibson has headed off to rehab, Hollywood's under-the-carpet cure-all. Maybe the regimen could include some sensitivity training?
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